Japan Exit Tax on Securities: What You Need to Know Before Leaving Japan
【Koshida Accounting Firm Column Date:】
Hello, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.
I aim to assist non-Japanese business owners who need help with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.
Many foreign residents are unaware that Japan has an Exit Tax system. If you own securities or other financial assets before leaving Japan, you may become subject to tax on unrealized capital gains. This article explains who is affected, which assets are covered, and when the tax may apply.
1. Who Is Subject to Japan’s Exit Tax?
Japan’s Exit Tax generally applies to individuals who have had a domicile or residence in Japan for more than five years during the ten years before leaving Japan. This may include foreign nationals with a spouse visa or permanent resident status. However, certain visa holders, such as diplomats, professors, and Business Manager visa holders, may be excluded.
2. Which Assets Are Subject to Exit Tax?
Assets subject to Japan’s Exit Tax include listed and unlisted securities, investment trusts, partnership interests, unsettled derivative transactions, and margin trading positions. Both Japanese and foreign securities are included. If the total market value of these assets exceeds 100 million yen, unrealized capital gains may become taxable when you leave Japan.
3. When Are Assets Valued?
The assets are generally valued as of the date you leave Japan. If you appoint a tax agent before departing, certain filing and payment procedures may become easier, and you may qualify for tax deferral if the legal requirements are met.
4. Can You Defer Japan’s Exit Tax?
Yes. In certain cases, you may defer the payment of Japan’s Exit Tax by appointing a tax agent and providing the required security. Annual reporting requirements must be satisfied throughout the deferral period.
5. Planning Ahead to Reduce the Impact of Japan’s Exit Tax
If you are a non-permanent resident of Japan, capital gains from securities that you acquired before becoming a Japanese tax resident are generally subject to Japan’s remittance basis of taxation. In many cases, if you do not remit funds to Japan during the same calendar year in which the gains arise, those gains may not be taxable in Japan, provided you have no other taxable foreign-source income.
With careful planning, it may be possible to coordinate the timing of remittances and the sale of securities. Depending on your circumstances, this can help reduce the overall tax burden and, in some cases, lessen the practical impact of Japan’s Exit Tax. Professional advice is recommended before taking any action.
Leaving Japan can have important Japanese tax consequences, especially if you own securities, investment funds, or other financial assets. Reviewing your tax position before departure may help you avoid unexpected tax liabilities.
Our accounting office regularly assists foreign business owners and individuals with Japanese tax planning, tax filings, and cross-border tax matters. Through our professional network, we can also introduce trusted specialists in immigration, company registration, social insurance, legal matters, and business consulting.
If you are planning to leave Japan and would like advice on Japan’s Exit Tax or other Japanese tax issues, please feel free to contact us. Early tax planning before leaving Japan can often make a significant difference.